Oil

CRUDE oil slipped for a second straight day on June 25, weighed by weaker US refined fuels markets and potential negative impact from Greece’s debt crisis on European energy demand.

Worries of a possible glut emerging in US gasoline and diesel supply after large builds in both last week added to concerns that millions of barrels of Nigerian crude were floating around the Atlantic Basin looking for buyers.

Crude oil futures settled down more than 1pc on June 24, after a government report showing an eighth straight weekly drop in US crude stockpiles was offset by a large build in refined products.

Uncertainties about progress in the Greek debt crisis added to the energy market’s skittishness, even as support emerged from roadblocks to an Iranian nuclear deal aimed at allowing Tehran to resume oil exports without restrictions. Brent futures LCOc1 settled down 6 cents, or 1.5pc, at $63.49/barrel. US crude CLc1 ended down 74 cents, or 1.2pc, at $60.27.

The US Energy Information Administration said crude stockpiles fell 4.9m barrels last week. The EIA also said gasoline stockpiles rose 680,000 barrels, versus a forecast drop of 304,000 barrels. Inventories of distillates, which include diesel and heating oil, jumped 1.8m barrels, more than an expected build of 1m.

In the Singapore market, oil prices were mixed in Asia on June 25 following a bearish US energy report, while talks over crude producer Iran’s nuclear programme dragged on.

The US benchmark West Texas Intermediate for August delivery fell three cents to US$60.24 while Brent gained 14 cents to $63.63 in mid-morning trade.

The US Department of Energy’s weekly report showed domestic crude output edged up to a record 9.6mbpd in the week to June 19, and that crude stockpiles, though down 4.9m barrels in the week, were still at a near-record 463m barrels.

Russia was China’s largest supplier of crude oil for the first time on record in May, as Moscow looks beyond Europe for customers and grows its ties in the east. The country leapfrogged Saudi Arabia, the world’s largest oil exporter, sending almost 930,000bpd to China, up 21pc since April, according to customs data published recently. Russian exports to China have more than doubled since 2010.

Saudi Arabia dropped from the top spot to number three, below even Angola, with sales falling to 722,000bpd, down almost 43pc from the month before.

Gold

IN the Singapore market, gold edged higher on June 26, recovering from its lowest in more than two weeks as Greece failed to reach an agreement with its international creditors, although gains were capped by expectations of a US interest rate hike.

Asian equities fell as Greece failed again to reach an agreement with its creditors and stumbled towards a default, while major currencies like the euro and dollar drifted as the debt saga sidelined investors. Spot gold rose 0.1pc to $1,174.98/ounce. Prices fell to their lowest since June 8 at $1,171.02/day earlier.

In the London market gold steadied on June 25 after four days of losses as traders took to the sidelines to await further news on Greece’s negotiations with its creditors, with caution over the metal’s longer-term outlook weighing on interest.

Spot gold was at $1,174.00/ounce at 1339 GMT, little changed from the previous session, while US gold futures for August delivery were up 30 cents at $1,173.20. Spot prices earlier hit a two-week low of $1,171.02. Gold has held largely between $1,160 and $1,230 since mid-March, struggling to break higher despite an ostensibly bullish rise in tensions over Greece.

Gold has faced additional pressure from a stronger dollar, which hit a two-week high against the euro earlier this week before steadying on June 25.

Meanwhile silver was down 0.6pc at $15.83/ounce, spot platinum was up 0.2pc at $1,073.24/ounce, and spot palladium was down 2.4pc at $679.63/ounce.

Palladium fell to its lowest since July 2013 at $673.47/ounce earlier, having broken through key chart support last week. Prices have slid 14pc so far this year, hurt by perceptions that supply of the white metal is plentiful.

China plans to launch a yuan-denominated gold fix by the end of 2015 via the Shanghai Gold Exchange (SGE), in a move aimed at giving the world’s biggest bullion producer and consumer more influence over pricing.

The first public confirmation made by an exchange official comes after Reuters cited sources in February on the proposal for the fix to be set through trading on the SGE, the world’s biggest physical bullion exchange.

Given its leading role in gold, China feels it is entitled to be a price-setter for bullion and is asserting itself at a time when the global benchmark, the century-old London fix, is under scrutiny for alleged price-manipulation.

If the yuan fix takes off, China could compel local buyers and foreign suppliers to pay the domestic yuan price, making the London fix less relevant in the world’s biggest bullion market. However, given the yuan is not fully convertible, the two benchmarks could exist side-by-side globally.

China has been making efforts to liberalise the yuan and increase its influence in global gold markets. The Bank of China recently joined the London gold price benchmarking process, the first Chinese bank to do so, while the Industrial and Commercial Bank of China said it too was keen to join the process.

In Singapore, the spot gold rose 0.2pc to $1,176.80 an ounce, after dropping 2.2pc in the past four sessions. Prices fell to a two-week low of $1,171.03 on June 24. Gold, which is seen as a safe haven during times of financial and economic uncertainties, is facing additional pressure from a stronger dollar and expectations of a US interest rate increase.

Published in Dawn, Economic & Business, June 29th, 2015

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